Friday, December 13, 2013

Sir, Professor Mariana Mazzucato's concerns about lack of investment in innovation and its likely impact on longer-term growth are well placed...But her analysis of the cause is misquided. She suggestst that today's cash-rich companies could invest and do well in the long term, but choose not to because of their short-term orientation.

My research concludes that, on average, companies will not get a good return even in the long term. The reasons taxpayers need to invest in innovation is that the majority of benefits from innovation accrue to consumers as "consumer surplus" rather than to producers as profits. Take semiconductors, for example. Society has benefited immeasurably. But the producers made low returns for decades.

Governments do not need to intervene because of market failure. They need to intervene because the market is too efficient. It is not short-termism that makes companies reluctant to invest. It is the low returns caused by efficient competition

I remain your faithful and obedient blahblahblah and all the rest of the usual rubbish. (note-- make sure to excise this upon publication... ed.)

Tuesday, November 19, 2013

1. In Marx's encounter with political economy, criticism itself, and the elements
of criticism-- conflict, opposition, antagonism-- moves from thought and knowledge to
the activity of human being in their relations with other human
beings. Philosophy gives way to history. History is a product of
social beings, and therefore shifts from a contemplation of
abstractions, like progress, like freedom, to the concrete
determinations of necessity; from the abstraction of thought to the
concrete of conditions; from the abstraction of right to the concrete of
labor.

Marx develops this transformation through and
by the examination of the value relation. In the critique, the
inversion at the heart of this veiled relationship is exposed. The
subject initially apprehended as the material, concrete substance of
capital, the commodity, is revealed and displayed to be essentially immaterial,
indeterminate, but determined; universal to but derivative from the
specific condition of its creation. The abstract facet, the "slippery
soul," lacking weight but not gravity; absent height but not status;
without corporeality but with substance, the value relation, the
organization of labor as value-producing, as a value in exchange, is
exposed as the real material of political economy; the real material of
capital. It, the value relation, is both the code and the messenger for
human beings reproducing themselves as social being. It is the fused,
antagonistic, compressed, opposite, identity of labor and the condition
of labor as wage-labor.

We move from wealth as
the production of material objects, to wealth as the condition of that
production, the appropriation of value. We get to, although in a
completely degraded, immiserated form, wealth as the disposition over
time.

II. Every once in awhile, someone
notices that a recovery looks so much like a recession as to appear
indistinguishable. Every time this every once in awhile, when this
happens, it's news. The Wall Street Journal, that paper of
intelligent reporting and ignorant editorializing, on November 15
headlined an article "Eurozone rebound feels like a recession."

No
matter how many times it has happened before, it's always supposed to
be news, and everyone is supposed to be surprised that the recovery
looks so much like the recession, because...because good times are
supposed to be better than bad times; because expansion is different
than contraction; because... well, just because.

There
are differences, all right, between good times and bad, between recovery
and recession, between expansion and contraction, but they look so much
alike because they share the same womb; recovery and recession,
contraction and expansion are the "hostile brothers," the opposite
identical twins of capitalist accumulation.

The
response of the US bourgeoisie to this period known as the Great
Recession has been the drastic curtailment of production hours. Between
2007 and 2009, production hours in US industry declined 22 percent.
Between 2009 and 2011, there was no significant increase in production
hours. There was, however, an increase in the total value of the output
from US industry, which brought that measure above its previous peak in
2008.

III. The US Department of Commerce overseer of the US Census Bureau and the Bureau of Economic Analysis, produces an Annual Survey of Manufactures.
The survey provides data for approximately 70 different categories--
everything from total payroll to taxes and licensing fee, and using
several of those categories, it is possible to develop a calculus, and
approximation, for rates of extraction of surplus value, and the
conversion of surplus value into a rate of profit. We can utilize the
data to provide numbers in the formula that says: big C (total value of shipments) = c (cost of materials, plus consumption of machinery) + v (value of labor power, wages) + s (surplus value, the value absorbed in the production process beyond that that replaces the wage).

The
ASM categories are not precise matches for Marx's, hence the calculus
and the approximation. We (that means you and me, partners in this
excursion) have to make an estimate for fringe benefits for production
workers, based on data provided for total cost of fringe benefits
provided to all employees. The data provided for overall rates of
fringe benefits suggest 33 percent is a reasonable "add-on" accounting
for the costs of the fringe.

We utilize depreciation
amounts for the value of the means of production consumed. We utilize
total cost of materials utilized in production for the value of the raw
and processed materials required, and we use total value of shipments
(which includes revenues from sales of scrap, waste, etc) for our big C
capital. Because the ASM data includes production worker hours, we can
even calculate all these inputs, and outputs, on an hourly basis.

Since
it's history that we're talking about, since it's history we are always
talking about, what matters most is the trend. So...we look at the
period starting in 2007 ending in 2011 (the most recent year of
published data), and we select six major categories of US industry,
which together account for about 62 percent of the value of output from
all industry. Those six categories are the "building blocks" of capital
accumulation, F, M, C-- food, machinery, chemical: 1) food 2)
machinery manufacturing 3) transportation equipment 4) computer and
electronics 5) chemical 6) and the Big Papi of US capitalism, the
petroleum industry, which is represented in the "Petroleum and Coal
manufacturing classification.

All errors to
transcription, computation are mine. Errors in analysis will be
attributed to some other likely party, as soon as I can find one.
Meanwhile the data look like this:

Column1

Column2

Column3

Column4

Column5

Column6

Column7

2007-2011

Food Machinery Chemicals

(and Petroleum)

NAICS

Industry

C/hr $

c/h $

v/hr
$

s/h $

s/v

s/C

Manufa

282.23

163.52

24.89

93.82

3.77

0.33

31-33

307.53

186.92

25.69

94.92

3.67

0.31

300.1

172.72

26.34

101.04

3.84

0.34

337.13

191.21

27.39

110.66

4.04

0.33

2011

369.85

225.77

28.06

116.02

4.13

0.31

Petroleum

3986.01

3270.88

42.39

672.74

15.87

0.17

324

5080.59

4497.95

42.51

540.13

12.71

0.11

3368.38

2905.31

44.09

418.98

9.5

0.12

4412.23

3840.33

46.09

525.81

11.4

0.12

2011

5889.97

5101.1

48.31

740.56

15.33

0.13

Food

258.03

158.06

20.23

79.74

3.94

0.31

311

285.85

181.93

20.51

83.41

4.07

0.29

285.67

172.91

21.13

91.63

4.34

0.32

298.22

185.47

21.87

90.88

4.15

0.3

2011

327.02

211.7

22.1

93.22

4.22

0.28

Machinery

232.69

127.42

25.77

79.5

3.08

0.34

333

244.26

135.29

26.97

82

3.04

0.34

250.64

137.3

27.56

85.78

3.11

0.34

274.63

148.63

28.66

97.8

3.41

0.36

2011

294.65

160.34

29.78

104.53

3.51

0.35

Transp
Eq

336.91

214.73

32.8

89.38

2.72

0.26

336

326.58

217.37

33.54

75.67

2.26

0.23

343.08

208.73

34.34

100.01

2.91

0.29

403.83

246.57

35.57

121.69

3.42

0.3

2011

416.78

261.62

35.97

119.19

3.31

0.29

Computer

371.01

162.91

25.83

182.27

7.06

0.49

334

396.32

172.5

29.12

194.4

6.67

0.49

416.93

181.62

30.39

204.92

6.74

0.49

440.61

190.16

33

217.45

6.59

0.49

2011

445.75

188.89

33.63

223.23

6.64

0.5

Chem

760.22

399.59

32.47

328.16

10.11

0.43

325

813.15

446.56

33.7

332.89

9.88

0.41

754.02

381.47

34.92

337.63

9.67

0.45

841.3

448.72

35.95

356.63

9.92

0.42

2011

925.45

506.19

37.16

382.1

10.28

0.41

First some words on method. I like simple math because, let's face it, if capitalism were that complicated, the bourgeoisie would never have been successful at it. Greenspan would have been flipping asset-backed burgers at Freddy Mac's. It's volume and velocity which make capitalism appear complicated and demand all that processing power.

Anyway "s/h," surplus value per hour, column 5: the result of Big C capital, column 2, less the sum of column 3 and column 4 (c+v);

There is a small decline in output per hour for industry as a whole in 2009. There is a steep decline in output per hour for the petroleum and chemical sectors, but modest increases for machinery, transportation equipment, and computers. In all categories of FMC, we see substantial recoveries in "s" per hour between 2007 and 2011.

From the information in this table, it would be difficult if not impossible not only to gauge the intensity of the "Great Recession," but also its breadth in both time and place. Indeed the recession and recovery seem almost, but not quite, indistinguishable, and aberrations from the "smooth course" of capitalist "development." That's because a bit of critical information is absent from the ratios of output, costs, and surplus. That critical input is "production worker hours."

In 2011 production worker hours were:
12% below the 2007 mark in the chemical classification;
30% below the 2007 mark in the computer and electronics classification;
25% below the 2007 mark in the transportation equipment classification;
18% below the 2007 mark in the machinery manufacturing classification;
5% below the 2007 mark in the food manufacturing classification;
7.5% below the 2007 mark in the petroleum/coal classification.

More capital has been exchanged with less labor power, in less time. The portion of the working time that is required for the workers to reproduce a value equivalent to their own wage is reduced; that is to say it recovers to the ratio achieved prior to, and right at the beginning of the contraction. The recovery is achieved in reduction of the proportion of living labor appropriated in production. The recovery indeed looks just like the contraction, because it is just like the contraction.

If wealth is the disposition over time, capitalist wealth is the disposition over alienated labor time, and the recovery in capitalist accumulation is the dissolution of wealth, the expansion of poverty as capital cannot exploit the labor-power profitably. Living labor-time is, more than less, expelled from the production process in order that the living labor time remaining in the valorization reproduces itself more rapidly.

If we break these value relations into production minutes, we find in 2011 that for every hour of production in the chemical sector, 32.8 minutes are represented by cost of materials and machinery, the pre-existing value that is preserved and passed along in production; 2.4 minutes represents the cost of labor (or it takes 2.4 minutes for the worker to produce a value equivalent to his/her hourly wage) and 24.8 minutes represents the surplus labor time, the surplus value.

In the transportation sector, the proportions are 37.7 minutes in "pass-through" value, 5.1 minutes to reproduce the wage, and 17.2 minutes in surplus value.

For machinery manufacturing, we get 32.6 minutes for the pre-existing value, 6.1 minutes to reproduce the wage, and 21.3 minutes of surplus value.

In the food production sector, 38.8 minutes for c , 4 minutes for wages, 17.2 minutes for surplus value.

For computer and electronics manufacturing, 25.4 minutes for c, 4.6 minutes for v, and 30 minutes for s.

For petroleum........don't even ask, it's flat out ridiculous, or actually not, its precisely proportionate to the tremendous investment in fixed assets, the "overweight" in the petroleum sector; massive amount of pre-existing value deployed to accelerate the pace of production, to reduce production times.

Given the minimal times involved for the worker to produce a value equivalent to his/her wages, it is also clear just how difficult it is to push s/C, a proxy here for the rate of profit, higher The increment of accumulation runs into the barrier of all previous accumulation.

Absent a generally applicable technological breakthrough that can dramatically reduce the cost of the components of the production process, the rate of valorization stagnates, and stagnation is an achievement.

Writing in Capital, Volume 1, Marx notes "The constant tendency of capital is to force the cost of labour back towards this zero" (Part 7, Chapter 24, Section 4). With reproduction times of 1 minute, 2 minutes, 4 minutes, or 6 minutes per hour, capital has pretty much forced that cost, relative, to the mass of value animated, to zero. What else can capital do? Lots of things, and none of them good.

For one, as Marx wrote, "...there also comes a time in every industrial cycle, when a forcible reduction of wages beneath the value of labour power is attempted for the purposes of cheapening commodities."

The cheapening of commodities is not exactly the purpose-- appropriating a greater portion of the total available surplus value by hook or crook is. As intense and extensive as the attacks on the living standards of workers have been, we are at the very beginning of that time in this cycle. The "recovery" such that it is, will be worse than the recession.